November 26, 2015

The Duty to Mitigate: When is an Employee Required to Accept an Offer to Return to the Same Employer?

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The British Columbia Court of Appeal (the “BCCA”), in Frederickson v Newtech Dental Laboratory Inc., 2015 BCCA 357, overturned the trial judge’s finding that Frederickson had failed to mitigate her damages because she refused to accept an offer of re-employment from her employer, Newtech Dental Laboratory (“Newtech”).

Frederickson was employed with Newtech, a small business specializing in making dental crowns, for more than eight years. She took a medical leave of absence at the end of April 2011. When she reported back to work on July 20, 2011, her employer advised her that she was laid off due to insufficient work. That September, Frederickson sent a demand letter to her employer after taking the position that she had been wrongfully dismissed. On September 23, 2011, Newtech directed Frederickson to return to work three days later. Frederickson subsequently commenced an action for damages for wrongful dismissal against Newtech. Prior to learning that an action had been commenced against it, Newtech offered to re-employ Frederickson with an offer to pay her unpaid wages between July 20, 2011 and September 26, 2011, the date she was invited to return to work. Newtech again on two separate occasions, offered to re-employ Frederickson at her same position, salary and benefits and to pay her lost wages to the date of the first offer to re-employ, September 23, 2011. Frederickson declined all offers due to her employer’s behavior towards her since her purported layoff in July 2011. She was unable to secure employment until the following August, after obtaining a diploma in bookkeeping; she found a new job as a bookkeeper.

Evidence at trial demonstrated that the owner of Newtech had, on two occasions, recorded private phone conversations he had with Frederickson without her knowledge. In addition, the owner had also discussed with another employee, the fact that Frederickson should be too embarrassed to return to work. The trial judge however, found that Frederickson had failed to take reasonable steps to mitigate her damages by refusing the offer of re-employment from Newtech. She was only awarded her damages for the period between July 20, 2011 and September 23, 2011, the date that she was first offered re-employment. Frederickson appealed this decision.

Madam Justice Saunders, writing for a unanimous BCCA, found that the trial judge erred in respect to the mitigation issue in two ways: (1) in failing to accord significance to the incomplete nature of the offer of re-employment; and (2) in failing to consider the element of mutual trust that was lacking from the work environment after July 20, 2011. She held that the September offer made by Newtech was not a “make whole” offer since it did not deal with Frederickson’s lost income between July and the date she was directed to return to work since Frederickson was not offered any lost income until October, when Newtech offered lost pay only up to September 26.

As stated by Madam Justice Saunders, the question to be asked when mitigation is in issue is whether a reasonable person in the employee’s position would have accepted the employer’s offer. This analysis includes a consideration of the full nature of the employment relationship. She found that on the facts of this case, Frederickson’s trust in her employer was eroded by the owner of Newtech in recording the private conversations and in breaching the confidence one would expect from their boss. She therefore found that on the facts of this case, any chance of repairing the employment relationship was lost.

Based on the two independent reasons outlined above, Madam Justice Saunders concluded that the trial judge erred in law by finding that Frederickson failed to mitigate her damages. She added that it is an infrequent case that requires an employee to accept re-employment. Frederickson’s appeal was allowed.

This decision adds to the uncertainty about whether an employee is required to accept re-employment as part of the duty to mitigate in the context of wrongful dismissal. With inconsistent decisions flowing from different courts, employers who intend to re-employ a terminated employee will want to make the employee “whole” for any losses and ensure that their conduct towards the employee does not damage the mutual trust inherent in the employment relationship.

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